(Updates, adds Wall Street outlook)
By Jeremy Gaunt, European Investment Correspondent
LONDON, March 27 (Reuters) - Central banks moved to provide
extra liquidity to stressed markets on Thursday, helping boost
European shares, while the dollar recovered some strength after
a recent battering.
Wall Street also looked set for a positive start, although
Asian shares closed generally lower. They were hit by signs that
the U.S. economy is flagging, including tumbling orders for
U.S.-made manufacturing goods, along with worries about more
bank write-downs after a number of earnings downgrades.
The European Central Bank promised publicly to add
additional liquidity if needed as the quarter comes to an end
and the Bank of England and Swiss National Bank operated in the
markets to try to get interbank lending rates down.
Traders and analysts said extra liquidity would be welcomed
given fresh tensions on markets which have pushed short-term
interbank lending rates to their highest level this year.
"It seems to be the same old story - there's a scramble for
cash at the moment," said a trader in Dublin.
Buoyant earnings in Europe also boosted sentiment with
better-than-expected results from Swedish fashion giant Hennes &
Mauritz <HMb.ST> and from insurer Swiss Life <SLHN.VX> supported
buyers.
The FTSEurofirst 300 index <> was up 0.9 percent,
having closed down in the previous session, part of an
increasing yo-yo effect on financial markets in general.
Earlier, Japan's Nikkei average fell 0.8 percent <> or
102.05 points at 12,604.58. The broader TOPIX index <> shed
0.9 percent to 1,226.44.
Analysts took some comfort, however, that losses had not
been greater.
"We are not seeing panic selling like before," said Hiroaki
Osakabe, fund manager at Chibagin Asset Management.
DOLLAR RECOVERS
The dollar edged up against the euro but was still heading
for the worst quarterly performance since late 2004.
The euro <EUR=> was down 0.2 percent on the day at $1.5808,
below last week's record highs above $1.59, but still up more
than 8 percent this quarter
"There was quite a strong rally in euro/dollar yesterday and
it seems that the market got caught a bit short dollars, so now
there is a slight recovery, and there is some extra funding
demand for dollars into quarter end," said Geoffrey Yu, currency
strategist at UBS in Zurich.
The dollar was also up 0.4 percent at 99.38 Japanese yen
<JPY=>. It has lost more than 10 percent this quarter against
the yen.
Euro zone government bonds sold off slightly. The two-year
Schatz yield was up 1 basis points at 3.436 percent <EU2YT=RR>
while the 10-year Bund yield was up 4 basis points at 3.903
percent <EU10YT=RR>.
(Editing by Gerrard Raven)
